华陀再世
一个中国医学生(CMG)在美国的生活。。。
Instead of the old debate over whether we’ve reached peak oil, it makes a lot more sense to think in terms of what we’ve dubbed “peak economic oil”, which relates demand for oil to its price.
Peak oil — the idea that we’re heading towards a point (or may be there already) where world oil production irreversibly declines—has always been a hotly contested issue within the energy world. We’ve long believed peak oil is a real concern. But we wouldn’t dispute some of the arguments from the anti-peak oil contingent.
For instance, we grant that if a massive global depression pushed oil demand down to 70 million barrels a day, it wouldn’t matter if peak oil kicked in at 85 million barrels or 100 million barrels—we’d have enough oil for our needs.
The danger in this kind of thinking, though, is that it encourages everyone to ignore the very real problem of growing resource scarcity, of which oil is the poster child. This is bad for investors, turning them away from investments with outsized potential. And it’s bad for society, because if we don’t come to grips—and soon—with resource shortages, our standard of living could take a permanent dive.
Many of the arguments against peak oil, such as those made by Stanford professor Steven Gorelick and recently echoed by syndicated Reuters columnist Christopher Swann, focus on the emergence of nonconventional oil resources. Their point is that oil reserves are rising thanks to Canada’s oil sands, major potential in Brazil, the Bakken Shale formation in the U.S., and other promising sources. As oil prices move higher, the thinking goes, it will spur more efforts in these once overlooked areas, keeping production uptrended for a long time to come.
These arguments, however, miss the key point, while fanning a dangerous complacency that discourages the development of alternative energies or even energy conservation.
After all, not even the most fervent believers in peak oil claim it will ever be flat-out impossible to keep oil production rising. If nothing else, enormous amounts of oil and ready oil substitutes probably exist on other planets—retrieving that oil would simply be too costly.
This is something that peak oil’s formulator, M. King Hubbert, didn’t address. Hubbert’s law simply says that once half the endowment of a resource has been extracted, production can no longer be increased. Further, once production peaks, it enters a relentless though possibly gentle downtrend. Hubbert, however, didn’t take into account that theoretically, even when more than half an endowment is consumed, you usually still can increase production if you’re willing to spend the massive amounts of money necessary.
What put Hubbert on the map was his prediction that, based on his estimates of U.S. oil endowment, oil production would peak here in 1970. He hit the nail on the head. U.S. oil production continued to decline apart from a few years when Alaska’s North Slope was coming on stream. But North Slope production peaked shortly thereafter, and soon U.S. oil production was hitting new lows.
To the surprise of many peak oil adherents, however, U.S. oil production has been edging up a bit. Credit goes to production from places previously too costly or technologically challenging to develop, such as the Bakken shale and deepwater deposits in the Gulf of Mexico. But while such previously inaccessible sources are now adding to supplies, the expense and risk are far greater than with conventional oil drilling
Last summer’s catastrophic Gulf oil spill is just one example of the added costs. Obtaining oil from the deep waters off Brazil, assuming it’s feasible, will also be exceptionally costly. Petrobras, the Brazilian oil giant that controls most of the deepwater leases, has suggested underwater cities might need to be constructed.
The original notion of peak oil, in other words, is too simplistic. It overlooks oil from nonconventional sources and loses force when oil demand falls. Even the IEA, bullish on oil as it long has been, now says conventional oil is in the process of peaking (see chart on p.1). Unconventional and more expensive oil will have to account for growing oil demand.
Rather than talk about peak oil, then, we think it makes more sense to think in terms of what we’ve dubbed “peak economic oil” (PEO). We define PEO as a condition in which small increments in demand lead to highly disproportionate increases in price. The more disproportionate the price increase, the more severe PEO.
In other words, while peak oil defines oil production as a function of time, PEO defines oil price as a function of demand. When this relationship looks like the upward part of a smiley face (a strictly convex function), we have reached PEO. (Note that PEO also allows for dramatic drops in oil prices when demand falls, as happened in 2008.)
And there is no doubt at all that we have reached, and passed, the point of PEO. As our measure of oil demand we have used a mixture of conventional oil and liquids from nonconventional sources that can be substituted for oil. Clearly there are issues to clarify, such as the period over which to measure demand and price. But regardless, PEO is growing more intense, to a degree not widely appreciated.
Between 1990 and 1998, liquid demand climbed by about 10 percent, yet oil prices fell by 50 percent. Between 1998 and 2004, liquid demand rose by another 10 percent or so, but this time oil prices rose by well over 100 percent. In 2010, oil prices finished the year near $90 though liquid demand was about the same as in 2006, when oil prices averaged $69 and finished the year at $62.
PEO suggests, then, that if oil demand continues to rise, oil prices are headed dramatically higher. New highs in 2011 or 2012 would not be surprising if worldwide growth remains on track and demand for liquids rises. One clear implication for investors is that nonconventional oil companies that can increase production at relatively steady costs are great buys. Companies that enable oil conservation are great buys as well. Our second table lists several companies that should do very well in the current environment, which is characterized by rising oil demand and PEO.
Borg Warner and Johnson Controls, two recent recommendations, are among the best bets in the oil conservation arena (see last month’s front page)—Johnson Controls for its systems that make office buildings more energy-efficient, BorgWarner for its parts that make the internal combustion engine run more efficiently.
Canada’s tar sands constitute the world’s largest nonconventional oil play, which is mainly why Canada has replaced Saudi Arabia as our leading exporter of oil. But despite rising production and technological improvements that reduce water and gas use, the tar sands remain a difficult and expensive way to obtain oil. The largest and most leveraged tar sands company is Canada’s Suncor, whose history has been two steps forward and one step back. Thus despite tremendous potential, enhanced by its acquisition of PetroCanada, the stock has lagged. But for investors willing to overlook the near-term missteps that go hand in glove with tar sands mining, Suncor offers outsized long-term potential.
The two U.S. companies most leveraged to nonconventional oil in the U.S. are Continental Resources and Newfield Exploration. Both companies benefit from technologies that allow the extraction of oil from shale formations, of which Bakken Shale is the largest. Of the two we prefer Continental because of its focus on oil, with around 75 percent of its production coming from unconventional oil. We expect the company’s production will grow at a double-digit pace for at least the next five years. Despite its high multiple, potential growth and excellent management augur a much higher stock price.
（from Dr. Stephen Leeb’s e-mail）
